About Piponomics

Economics plays a huge role in the foreign exchange market. I enjoy looking at economic trends and trying to see how it may affect currencies, and life in general. I will post my thoughts and observations here. I'm throwing macroeconomics, forex trading, pop culture, and everyday life into a pot and hopefully the final product are lessons about the FX market that's easy to understand.

Is Euro Zone Over the Hump?

Another week of economic data, another week of good news for the euro zone! Is it time to finally say that the euro zone is over the hump and well on its way to recovery? After all, the results of the recent stress tests weren’t so bad and were welcomed with a romp of risk appetite over the past couple of weeks. As I mentioned in a previous post, only seven banks failed, with these banks needing just 3.5 billion EUR to help fund their shortfalls.

Moreover, optimism in the region has picked up thanks to the recent successful bond auctions of Hungary and Spain. While Hungary is still applying to be part of the euro zone, it hit a huge stumbling block about a month ago when the EU and IMF expressed concerns about Hungary’s public debt. Meanwhile, Spain also has its own debt problems and, like other European nations, it has been forced to implement tough austerity measures.

But the fact that demand for both Hungarian and Spanish bonds was high indicates that both countries still have the ability to find financing despite tough times. This is a good sign that confidence is picking up in these two economies and that the entire euro zone might be able to avoid a full-blown debt crisis.

Just like debt concerns, fears of a double-dip recession are also starting to subside. That’s because the euro zone’s two largest economies, Germany and France, have been posting upbeat economic figures. Just a couple of weeks ago, these two bigshot economies boasted of better-than-expected manufacturing and services PMI readings, hinting at stronger growth prospects for the entire region.

Aside from that, the euro zone also posted a whopping 3.8% increase in industrial new orders, far better than the previously seen 0.6% uptick. Meanwhile, employment seems to be stabilizing as the jobless rate has been holding steady at 10.0% for the past four months. And since the euro zone’s economic condition is starting to show signs of hope, business and consumer confidence have started posting improvements as well.

Judging from those economic indicators, it looks like the euro zone has weathered the storm. And it seems like European Central Bank (ECB) officials are starting to think so too. Did you notice the slightly optimistic tone in ECB President Jean-Claude Trichet‘s voice at the press conference yesterday?

If you ask me, his unusually upbeat remarks may be an indication that the euro zone is ready for another shot at an exit strategy. In any case, analysts believe he won’t lay out his battle plans until next month. Jean-Claude Van Damme’s got nothing on Trichet!

According to the ECB President, they plan to slowly cut back on their emergency bond purchases. In other words, they’re looking to mop up any excess liquidity that they might have injected into the markets back when they tried to stimulate growth. Because it could potentially curb economic growth, this is usually a step reserved for when the economy has stabilized and shown signs of recovery. I don’t know about you, but this looks like a good sign to me. It sure looks like euro zone’s feeling confident enough to go down that road!

…did I notice the slightly optimistic tone in ECB President Jean-Claude Trichet’s voice at the press conference…”

An optimistic tone? An op[timistic tone?? Gee, let me disregard the fact that the Greek Government’s public debt has barely been funded, Spain and Portugal are teetering on the edge of bankruptcy, the Italian debt crisis has not even been recognized, the Hungarians will bring in the=ir own debt and that the Greman voters are completely browned off at being on the hook and will porobably bring in an anti-EU government next.

A “slightly optimistic tone in.. Jean-Claude Trichet’s voice..” trumps all of that. Quick let me put all my money in there! It was just burning a hole in my pocket anywway.

donkeykong

are u the one who makes the drawings?

RobinDTrader

…did I notice the slightly optimistic tone in ECB President Jean-Claude Trichet’s voice at the press conference…”

An optimistic tone? An op[timistic tone?? Gee, let me disregard the fact that the Greek Government’s public debt has barely been funded, Spain and Portugal are teetering on the edge of bankruptcy, the Italian debt crisis has not even been recognized, the Hungarians will bring in the=ir own debt and that the Greman voters are completely browned off at being on the hook and will porobably bring in an anti-EU government next.

A “slightly optimistic tone in.. Jean-Claude Trichet’s voice..” trumps all of that. Quick let me put all my money in there! It was just burning a hole in my pocket anywway.